[Federal Register Volume 60, Number 198 (Friday, October 13, 1995)]
[Notices]
[Pages 53448-53449]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-25365]
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[[Page 53449]]
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36341; File No. SR-Phlx-95-51]
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Order Granting Approval To Proposed Rule Change and Notice of Filing
and Order Granting Accelerated Approval of Amendment No. 1 To Proposed
Rule Change Relating to Employee Trading Accounts
October 5, 1995.
On July 17, 1995, the Philadelphia Stock Exchange, Inc. (``Phlx''
or ``Exchange'') submitted to the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to increase the requirements placed on securities
trading accounts of employees of member and participant organizations.
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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The proposed rule change was published for comment in the Federal
Register on August 18, 1995.\3\ No comments were received on the
proposal. On September 14, 1995, the Phlx submitted Amendment No. 1 to
the proposed rule change.\4\ This order approves the proposed rule
change. Also, Amendment No. 1 is approved on an accelerated basis.
\3\ Securities Exchange Act Release No. 36096 (Aug. 11, 1995),
60 FR 43177.
\4\ See letter from Gerald O'Connell, First Vice President,
Phlx, to Glen Barrentine, Team Leader, SEC (Sept. 14, 1995). In
Amendment No. 1, the Phlx added to the Rule a requirement that an
employee of a member or participant organization who opens a
securities trading account with a nonmember make arrangements for
his employer to receive duplicate confirmation reports and monthly
trading account statements.
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Currently, Phlx Rule 751 requires a member organization to obtain
prior written approval from the Business Conduct Committee (``BCC'')
before it can take or carry an account of a clerk entitled to access to
the Floor of the Exchange. The current rule applies to floor clerks
only and does not require that the clerks' employers be informed of
their employees' trading accounts.
By amending Phlx Rule 751, the Exchange proposes to increase the
safeguards placed on securities trading accounts of employees of member
and participant organizations.\5\ Specifically, the proposed amendment
would expand the Rule's coverage to include all employees associated
with a member or participant organization; require the employer to
consent in writing before such an account may be taken or carried by a
member or participant organization; and require the member or
participant organization that carries the account to provide the
employer with duplicates of the employees' confirmation reports and
trading account statements. The proposed amendment also would impose an
obligation on employees who open trading accounts with a nonmember to
make arrangements to provide their employers with duplicate
confirmation reports and trading account statements. By increasing the
employers' awareness of its employees' trading patterns through the use
of employer consent and duplicate records relating to the account, the
Exchange believes that member and participant organizations will be
able to supervise their employees more effectively.
\5\ A member organization includes member firms and member
corporations. A participant organization refers to foreign currency
options participant organizations.
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The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange and, in
particular, with the requirements of Section 6(b).\6\ Specifically, the
Commission believes the proposal is consistent with the Section 6(b)(5)
\7\ requirements that the rules of an exchange be designed to promote
just and equitable principles of trade, to prevent fraudulent and
manipulative acts, and, in general, to protect investors and the
public. The proposed amendments to Phlx Rule 751 should facilitate the
supervisory efforts of a member or participant organization by
providing it with information regarding its employees' private
securities transactions. In addition, the proposed amendments should
reveal existing and potential conflicts of interest as well as alert a
member or participant organization when additional surveillance could
be appropriate.
\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
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The Commission also considers the proposed rule change to be
consistent with Section 6(b)(1) \8\ requirement that an exchange have
the capacity to enforce compliance by its members and persons
associated with its members with the Act, the rules thereunder, and the
rules of the exchange. The proposed amendments should assist member and
participant organizations in monitoring transactions by their employees
that may violate the Act or the rules of the Exchange.
\8\ 15 U.S.C. 78f(b)(1).
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For the same reasons, the Commission also finds that it is
consistent with the Act to expand the coverage of Phlx Rule 751 to
include all of the employees of member and participant organizations.
The Commission finds good cause for approving proposed Amendment
No. 1 prior to the thirtieth day after the date of publication of
notice of filing thereof in the Federal Register. The Amendment merely
addresses the situation of when an employee opens a trading account
with a nonmember, thereby foreclosing a potential loophole in the Rule.
Also, the Amendment conforms the proposal to similar rules of other
self-regulatory organizations.\9\ For these reasons, the Commission
finds good cause for accelerating approval of the proposed rule change,
as amended.
\9\ See Securities Exchange Act Release Nos. 33306 (Dec. 9,
1993), 58 FR 65603 (approving amendments to American Stock Exchange
Rule 415) and 30744 (May 27, 1992), 57 FR 24075 (approving
amendments to New York Stock Exchange Rule 407).
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Interested persons are invited to submit written data, views, and
arguments concerning Amendment No. 1. Persons making written
submissions should file six copies thereof with the Secretary,
Securities and Exchange Commission, 450 Fifth Street, NW., Washington,
DC 20549. Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. Sec. 552, will be available for inspection and
copying at the Commission's Public Reference Section, 450 Fifth Street,
NW., Washington, DC 20549. Copies of such filing also will be available
for inspection and copying at the principal office of the Philadelphia
Stock Exchange. All submissions should refer to File No. SR-Phlx-95-51
and should be submitted by November 3, 1995.
It therefore is ordered, pursuant to Section 19(b)(2) of the
Act,\10\ that the proposed rule change (SR-Phlx-95-51), including
Amendment No. 1, is approved.
\10\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\11\
\11\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 95-25365 Filed 10-12-95; 8:45 am]
BILLING CODE 8010-01-M
